Asea/Afscme Local 52 Health Benefits Trust v. Abbott Laboratories et al
Filing
50
MEMORANDUM Opinion and Order: For the foregoing reasons, the defendants' motion to dismiss for lack of personal jurisdiction as to St. Jude and improper venue 37 is granted and this case is dismissed without prejudice. The defendants' mo tions to transfer the case to a more convenient venue 35 and to dismiss for failure to state a claim and lack of subject matter jurisdiction 39 are accordingly denied without prejudice because they are moot. Civil case terminated. Signed by the Honorable Sharon Johnson Coleman on 6/18/2018. Mailed notice.(ym, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ASEA/AFSCME LOCAL HEALTH 52
HEALTH BENEFITS TRUST, individually
and on behalf of a class of similarly situated
third party payors,
Plaintiff,
v.
ABBOTT LABORATORIES, an Illinois
corporation, and ST. JUDE MEDICAL, LLC, a
Delaware corporation,
Defendants.
)
)
) Case No. 17-cv-6704
)
) Judge Sharon Johnson Coleman
)
)
)
)
)
)
)
)
)
MEMORANDUM OPINION AND ORDER
The plaintiff, the ASEA/AFSCME Local 52 Health Benefits Trust (“ASEA”), brings this
action against Abbott Laboratories (“Abbott”) and St. Jude Medical, LLC (“St. Jude”), alleging that
the defendants produced a defective product and concealed that products’ defects from the FDA
and the public. The defendants now move this Court to dismiss ASEA’s claims for lack of subject
matter jurisdiction, for lack of personal jurisdiction, for improper venue, or for failure to state a
claim, or, alternatively, ask this Court to transfer this case to another venue. For the reasons set
forth herein, the defendants’ motion to dismiss for lack of personal jurisdiction and improper venue
[37] is granted, and the remaining motions [35, 39] are denied without prejudice as moot.
Background
The following facts from the plaintiff’s first amended complaint are accepted as true for the
purpose of the present motion. St. Jude manufactures a variety of medical devices to treat cardiac
conditions, including implantable cardioverter defibrillators (ICDs) and cardiac resynchronization
therapy defibrillators (CRT-Ds). Both ICDs and CRT-Ds are surgically implantable devices that use
electrical impulses to moderate irregular heart rhythms. These devices are powered by lithium
1
batteries. When their battery runs low, they are programed to provide one month of vibratory
warnings prior to a battery failure.
Unfortunately, a number of St. Jude’s ICD and CRT-D products (“the affected products”)
suffered from a battery defect capable of causing rapid battery failure. This defect, as well as its root
cause, was first reported by St. Jude’s battery supplier in 2011. At that time, St. Jude did not report
or investigate the problem, but instead represented that the cause of unexpected battery depletions
could not be confirmed. St. Jude subsequently received forty-two product reports between 2011
and 2014 indicating that the affected products might be subject to premature battery depletion.
Notwithstanding these reports, St. Jude repeatedly claimed that the cause of the potential defect
could not be determined and failed to rigorously review the available information. In 2014 a
patient’s death was linked to a premature battery failure in St. Jude’s products, and a published
journal article identified the cause of the premature battery failures in St. Jude’s devices.
In 2015, St. Jude and Abbott began negotiations regarding a potential merger. Prior to the
merger, which occurred on March of 2016, Abbott initiated a detailed due-diligence review of St.
Jude. Following that process and the merger, St. Jude opened new investigations into the battery
failure issue. These investigations were much more rigorous than prior efforts, and in August 2016
St. Jude decided to recall the defective devices. On October 10, 2016, the FDA initiated a class 1
recall of 251,346 St. Jude products made before May of 2015. The recall, however, only covered
patients’ out-of-pocket expenses, and does not reimburse third-party-payers for the cost of
monitoring and replacing the defective products.
The plaintiff, a third-party payer of medical expenses based in Alaska, alleges that the
defendants’ breached their express and implied warranties by selling a defective product and asserts
product liability and manufacturing defect claims, as well as claims of negligence, failure to warn,
2
misrepresentation, omission, and the violation of multiple consumer protection acts based on St.
Jude’s failure to timely disclose the product defect.
Discussion
The defendants contend that this Court lacks personal jurisdiction over St. Jude. When a
motion to dismiss is based on lack of personal jurisdiction, the plaintiff bears the burden of making
a prima facie showing establishing jurisdiction over each defendant. Nelson v. Park Indus., Inc., 717
F.2d 1120, 1123 (7th Cir. 1983). The facts pertaining to jurisdiction set forth in the plaintiff’s
complaint are assumed to be true unless controverted by affidavit, and all factual conflicts must be
resolved in the plaintiff’s favor. John Walker & Sons, Ltd. v. DeMert & Dougherty, Inc., 821 F.2d 399,
402 (7th Cir. 1987).
For a Court to exercise personal jurisdiction consistent with due process the defendant must
have sufficient contacts with the forum state such that the maintenance of the suit “does not offend
traditional notions of fair play and substantial justice.” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316,
66 S.Ct. 154, 90 L.Ed. 95 (1945). Personal jurisdiction exists in two forms; general jurisdiction and
specific jurisdiction. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 131 S.Ct.
2846, 180 L.Ed.2d 796 (2011). General jurisdiction extends beyond the boundaries of an individual
lawsuit, and exists when a corporation engages in “continuous corporate operations within a
state . . . so substantial and of such a nature as to justify suit . . . on causes of action arising from
dealings entirely distinct from those activities.” Daimler AG v. Bauman, 571 U.S. 117, 138, 134 S.Ct.
746, 187 L.Ed.2d 624 (2014). The Supreme Court has identified only two conditions where that
condition would be met: the defendant’s place of incorporation and the principle place of the
defendant’s business. Kipp v. Ski Enter. Corp. of Wis., Inc. , 783 F.3d 695, 698 (7th Cir. 2015) (citing
Daimler, 571 U.S. at 137–38). General jurisdiction may also be found elsewhere when the corporate
3
defendant’s activities in a state are so substantial that the corporation is “fairly regarded as at home”
in the state. Id.
Here, it is undisputed that St. Jude Medical, Inc. was incorporated and headquartered in
Minnesota and that, following the merger with Abbott, St. Jude Medical, LLC was incorporated in
Delaware and headquartered in Minnesota. ASEA, however, contends that since the merger St. Jude
has operated as Abbott’s corporate alter ego. ASEA therefore contends that St. Jude should be
treated as an extension of Abbott, which is incorporated and headquartered in Illinois.
The “alter ego” or “sham corporation” exception applies where a plaintiff alleges that a
defendant corporation is a mere shell used for the benefit of other defendants. The determination
of whether or not to pierce the corporate veil is determined by applying the law of the state of
incorporation. Wachovia Securities, LLC v. Banco Panamericano, Inc., 674 F.3d 743, 751 (7th Cir. 2012);
Stromberg Metal Works, Inc. v. Press Mechanical, Inc., 77 F.3d 928, 933 (7th Cir. 1996). St. Jude Medical,
LLC is incorporated in Delaware, so the Court applies Delaware law. Accordingly, the plaintiff must
plead facts supporting an inference that Abbott, through St. Jude, has created a sham entity designed
to defraud investors and creditors. Crosse v. BCBSD, Inc., 836 A.2d 492, 496 (Del. 2003).
Under Delaware law, courts disregard the corporate form only in exceptional cases. Eagle
Air Transp., Inc. v. Nat’l Aerotech Aviation Delaware, Inc., 75 F. Supp. 3d 883, 897 (N.D. Ill. 2014) (St.
Eve, J.) (quoting Winner Acceptance Corp. v. Return on Capital Corp., No. 3088-VCP, 2008 WL 5352063,
at *5 (Del. Ch. Dec. 23, 2008)). Determining whether to do so requires an intensive inquiry which
takes into consideration (1) whether the company was adequately capitalized for the undertaking; (2)
whether the company was solvent; (3) whether corporate formalities were observed; (4) whether the
controlling shareholder siphoned company funds; and (5) whether the company functioned as a
façade for the controlling shareholder. Winner Acceptance Corp., 2008 WL 5352063, at *5. In addition
to these factors, Delaware’s courts have required an element of fraud or similar injustice in order to
4
pierce the corporate veil. Mason v. Network of Wilmington, Inc., No. Civ. A. 19434-NC, 2005 WL
1653954, at *3 (Del. Ch. 2005).
ASEA alleges that Abbott exercised “complete” dominion and control over St. Jude Medical,
LLC, such that the two operated as a single, unified enterprise. In support, ASEA points to its
allegations that Abbott publically claimed responsibility for the recall of the defective devices, issued
updates about the devices in its own name, and communicated with the FDA about the devices in
its own name. ASEA also alleges that Abbott took over the facility that produced the devices in
question, but that the facility continued to be “listed” in St. Jude’s name. St. Jude also publically
advertised that “St. Jude Medical is now Abbott.” Finally, ASEA alleges that the two entities share
unidentified officers and managers, business operations, and facilities, that St. Jude’s earnings are
reported by Abbott, and that St. Jude’s operations are controlled by Abbott.
These allegations do not call into question St. Jude’s capitalization, solvency, or recognition
of corporate formalities. Cf. City of Greenville, Ill. v. Syngenta Crop Prot., Inc., 830 F. Supp. 2d 550, 563
(S.D. Ill. 2011) (piercing the corporate veil where evidence showed that the subsidiary company’s
board unanimously rubber-stamped the parent company’s recommendations on a regular basis
without discussion and where the subsidiaries employees were sometimes directly managed by
employees of the parent company). Nor do they suggest that Abbott was siphoning or diverting
funds from St. Jude. At most, the allegations in the complaint suggest that Abbott sometimes spoke
on behalf of St. Jude or sometimes represented that it had succeeded St. Jude. See LaSalle Nat. Bank
v. Vitro, Sociedad Anonima, 85 F. Supp. 2d 857, 865 (N.D. Ill. 2000) (Nordberg, J.) (“Personal
jurisdiction is based on actual evidence of control . . . rather than on a corporation's general
descriptions. Promotional statements made on a public website do not precisely convey the
operative corporate structure.”). Absent more, however, the allegations do not suggest that
unfairness or injustice has resulted from the relationship between St. Jude and Abbott, as would be
5
necessary to justify piercing the corporate veil under Delaware law. Doberstein v. G-P Indus., Inc., No.
CV 9995-VCP, 2015 WL 6606484, at *4 (Del. Ch. 2015). Accordingly, this Court does not have
general jurisdiction over St. Jude because it is not “at home” in the state of Illinois.1
ASEA also asserts that this Court has specific jurisdiction over St. Jude. Specific jurisdiction
arises from contacts with the forum state that “give rise to the liabilities sued on” and are
“continuous and systematic.” International Shoe, 326 U.S. at 317, Daimler A.G., 571 U.S. at 138. The
contacts with the forum state must be both related to the lawsuit and created by the defendant.
Walden v. Fiore, 571 U.S. 277, 134 S.Ct. 1115, 1121–22, 188 L.Ed.2d 12 (2014). Here, ASEA
contends that specific jurisdiction exists because St. Jude Medical, Inc. marketed, advertised, and
sold the defective devices in Illinois. ASEA, however, does not allege that it paid for any of the
defective devices in Illinois or that any of its beneficiaries had one of the devices implanted in
Illinois. Accordingly, ASEA cannot establish that any actions occurring in Illinois gave rise to its
claims against the defendants. Although it is true that potential class members might have
purchased defective devices from St. Jude in Illinois, specific jurisdiction cannot be premised on the
claims of unnamed putative class members. See Greene v. Mizuho Bank, Ltd., 169 F. Supp. 3d 855, 866
(N.D. Ill. 2016) (Feinerman, J.). Accordingly, ASEA has failed to establish that there is specific
jurisdiction over St. Jude in Illinois with respect to this suit. Because neither general or specific
jurisdiction exists with respect to St. Jude, this Court therefore lacks personal jurisdiction over St.
Jude.2
The defendants, in an alternative argument, contend that this is not a proper venue for
litigating this case with respect to either defendant. Under federal law, venue is proper in (1) a
Although this Court has general jurisdiction over Abbott, that does not provide a jurisdictional basis as to St. Jude.
Central States, Southeast and Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 943 (7th Cir. 2000).
2 ASEA asks that, if this Court rejects its prima facie showing of personal jurisdiction, it be permitted to engage in
jurisdictional discovery. Jurisdictional discovery, however, is only warranted after a prima facie showing of personal
jurisdiction has been made. Central States, Southeast and Southwest Areas Pension Fund v. Reimer Express World Corp., 230 F.3d
934, 946 (7th Cir. 2000).
1
6
judicial district in which any defendant resides, if all defendants are residents of the State in which
the district is located; (2) a judicial district in which a substantial part of the events or omissions
giving rise to the claim occurred; or (3) if there is no district that otherwise provides venue, in any
judicial district in which any defendant is subject to the court’s personal jurisdiction. 28 U.S.C. §
1391. As previously discussed, St. Jude is not a resident of Illinois and is not subject to personal
jurisdiction in this district. 28 U.S.C. § 1391(b)(1). ASEA’s arguments to the contrary
notwithstanding, it is also apparent that a substantial part of the events or omissions giving rise to
ASEA’s claim did not occur in Illinois. Abbott’s involvement in this case came only at the tail end
of the alleged period of wrongdoing and after all of the defective devices had already entered the
market. Accordingly, it cannot be said that the central events to this case occurred in Illinois. The
plaintiff, moreover, has conceded that this is not a proper venue under 28 U.S.C. § 1391(b)(3).
Accordingly, this Court is not the proper venue for this action.
CONCLUSION
For the foregoing reasons, the defendants’ motion to dismiss for lack of personal jurisdiction
as to St. Jude and improper venue [37] is granted and this case is dismissed without prejudice. The
defendants’ motions to transfer the case to a more convenient venue [35] and to dismiss for failure
to state a claim and lack of subject matter jurisdiction [39] are accordingly denied without prejudice
because they are moot.
IT IS SO ORDERED.
Date: 6/18/2018
Entered: _____________________________
SHARON JOHNSON COLEMAN
United States District Court Judge
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?